Agency:agencies
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Jammu Kashmir News: Jammu and Kashmir High Court clearly said in the hearing on Cross-LOC trade that PoK is a part of India and on this basis the trade taking place across the LoC will be considered intra-state. The court reprimanded the traders who sought GST exemption and said that they hid important facts. The court directed him to file a reply to the notices and follow the statutory appeal process.
Jammu Kashmir News: Jammu-Kashmir and Ladakh High Court has given an important decision. In this decision, the court clearly said that Pakistan-occupied Kashmir (PoK) is a part of India and on this basis the trade taking place across the Line of Control (LoC) will be considered as ‘intra-state trade’. By making this historic comment in the controversy over GST, the court has changed the direction of the entire matter. This is the reason why the ongoing hearing on GST liability is now linked to national boundaries and constitutional claims.
The High Court also admitted that some traders, who tried to get exemption from GST by calling cross LOC trade as international trade, went back on their old claims and presented new arguments in the court. Expressing displeasure over this, the judges said that PoK is an integral part of India, hence there is no question of describing this trade as import-export in any way.
Cross-LOC Trade: When did it start and why did it stop?
Cross-LOC trade started in October 2008 to restore trust between India and Pakistan. This trade was run on barter system i.e. without exchange of currency. After the Pulwama attack in 2019, intelligence agencies reported that this route was being misused for the supply of narcotics, weapons and fake notes, after which it was stopped.
What issue arose in the High Court?
Traders said that GST did not apply to them because the trade on both sides of the LoC was not between different countries, but under limited provisions under the SOP. But the court found that this argument was completely contrary to the earlier arguments.
What did the court say?
- PoK is a part of India, hence supply across LoC will be considered as intra-state supply.
- The government never issued any special notification regarding GST exemption.
- Traders knew that this supply comes under the purview of GST under Section 7 of the CGST Act.
- Tax authorities have the right to issue show cause notice for non-compliance of self-assessment.
- SOP does not mean that GST will not be applicable.
What did traders want?
- GST notices are out of time limit, hence should be cancelled.
- Cross-LOC trade should be considered GST free as it was governed by the SOP issued by the Centre.
- Tax should be taken on goods coming and going from PoK only if the traders there also pay tax.
- There was exemption in the old VAT law, hence there should be relief in GST also.
Whom did the court reprimand?
The High Court said the petitioners “hid important facts” and claimed GST exemption despite knowing that there was no notification. The bench of Judge Sanjeev Kumar and Judge Sanjay Parihar clearly said that the petitioners kept changing their claims, which the court considered unfair.
Tax Notice Deadline Disputes:
| Issue | Court’s conclusion |
| Were the notices out of time? | No, the notices are issued at least 6 months before the expiry of the deadline. |
| Are composite notices legal? | Yes, simultaneous release of 2017-18 and 2018-19 is valid. |
| Should the petition be decided directly? | Yes, first the statutory appeal process should be adopted. |
What should traders do now?
The court, while abstaining from giving a final decision on the dispute, asked the traders to pursue their statutory appeal process.
Finally two big orders of the High Court:
- Those who have not yet responded should file their response within 4 weeks from November 27.
- Those on whom the final order has been issued should file an appeal within 3 months from 27th November.
